THQ Reports Disappointing Q4 Fiscals

THQ Inc. today announced its fiscal results from the fourth quarter 2002, unveiling record net revenues of $217.8 million (an increase of 11% over last year), but unfortunately posting net income of $3.1 million, a decrease of 89% over last year's results.

THQ performed quite well with games such as WWE SmackDown! Shut Your Mouth, several of its SpongeBob Squarepants titles, Rocket Power and its Scooby Doo brands. Although Red Faction II received generally good reviews, sales of the first-person shooter were far less than expected, especially compared to Red Faction 1, which went on to become THQ's first PS2 Greatest Hits title. The PS2 RPG Summoner 2 was also a critical and financial disappointment.

"Although we achieved record revenues in the 2002 fourth quarter, our results were tempered by lower-than-expected sales of Red Faction 2 and our GameCube portfolio, and a cautious retail environment," said THQ's President and CEO Brian Farrell.

Revenues for the year increased 27% to a record $480.5 million. However, the net income for 2002 was $13.0 million (at 32 cents per share), down from $36 million the previous year.

But THQ was essentially hampered by a multitude of heavy fiscal troubles. It was hit with a $20 million loss in "special item" charges for the quarter, including a $1.6 million charge to cover WWF wrestling games (thanks to the entanglements from the lawsuit between the World Wide Fund for Nature and World Wrestling Entertainment); a $7 million charge from the settlement of a class-action lawsuit (filed three years ago); and a brutal $12 million charge for cancelling 20 game SKUs, many of which were slated for GameCube.

"Our GameCube portfolio did not perform up to expectations," Farrell added in his conference call. "In response to this, we have reduced the number of products in development for the GameCube platform."

THQ has several new games planned for the 2003, including impressive titles such as Splashdown 2 and the recently-revealed Sphinx.